Senate’s Semiconductor Bill May Benefit China More than US

On Wednesday, the Senate voted 64-33 to advance a bill aimed at boosting domestic production of semiconductor computer chips and bolstering the U.S. industry’s competitiveness against China.

Despite the bill’s stated purpose of better equipping American tech companies to compete with China, however, some experts are warning that the legislation may do the exact opposite.

The Senate’s CHIPS-plus bill would open up $280 billion of federal funding for U.S. semiconductor manufacturers. While the measure officially prevents companies receiving money from engaging “in any significant transaction” with the Chinese Communist Party, critics say the bill contains a number of loopholes that get around that provision.

In the bill’s current form, for example, companies would still be allowed to fund Chinese chip manufacturing if the technology is considered “legacy” — a designation that, in reality, applies to most of China’s industry.

“I still believe that [China is] probably three or four generations behind what is considered leading edge,” said Mario Morales, vice president of the International Data Corporation, in an interview.

“They have capabilities to support 28-nanometer [chips] and they’ve started some sampling of 14-nanometer,” Morales said. “But, the reality is that they need customers to really scale that capability, and a lot of the Chinese ecosystem is just not using that technology.”

Following its passage in the Senate, the CHIPS-plus bill now moves to the House of Representatives, where House Speaker Nancy Pelosi (D-CA) has promised to take up the legislation as quickly as possible.

Some Republicans in the House have vowed to oppose the bill, citing concerns over China and inflation.

“The latest version of Chuck Schumer’s fake China bill would boost inflation and despite Democrats’ claims, much of those taxpayer dollars will end up funding semiconductor factories in communist China, not at home,” Republican Study Committee Chairman Rep. Jim Banks (R-IN) said in an interview.

“This bill does not adequately safeguard federal funds from going to Communist China,” tweeted Rep. Debbie Lesko (R-AZ) on Friday. “There are not sufficient guardrails to prevent these funds from supporting semiconductor manufacturing in China or prevent businesses from expanding operations in China.”